Next Generation Supply Management Defined

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Daily Archives: November 11, 2008

In our last installment of the 2008 Sourcing Maniacs Vendor Road Tour, the maniacs had just finished talking with a somewhat contemplative looking gentleman from GDM somewhere near Denver, Colorado. We rejoin them shortly after their conversation with the somewhat contemplative looking gentleman from GDM.

Today’s post is a little lengthy, so it’s broken up into Interlude and Inquiry, which contains the vendor content.

We dig dig dig dig dig dig dig through our data the whole day throughTo dig dig dig dig dig dig dig is what we really like to doIt ain’t no trick to get rich quickIf you dig dig dig with a shovel or a pickIn a large data mine! In a large data mine!Where a million diamonds shine!

Yes Wakko, we do strategic sourcing decision optimization … and we think it’s one of the best solutions out there. And we do Contract Management …

Dot

perking up

CEO

and we’re in the process of preparing our first Supplier Relationship Management release, better known as SRM.

Yakko

Really?

CEO

Really. And when you add in our built in project management and our Smart Analytics solution, based on BIQ‘s leading spend analysis product, you see that we have one of the most complete end-to-end e-Sourcing suites on the market.

Dot

So you go head to head with Ariba and Emptoris?

CEO

All the time!

Yakko

And win?

CEO

More often than you’d be led to believe!

Dot

How often?

CEO

Let’s just say that we have well over 100 global customers, many in the Fortune 500, and that both our annual North American User Conference and our annual European User Conference are very well attended by happy customers who enjoy learning how they can do even more with the platform they have already bought, and at a very attractive price point I might add.

Wakko

How attractive?

CEO

We’re a True SaaS provider, so we are very competitive with our basic solution prices.

Dot

Under a Million?

CEO

We start at under one hundred thousand a year for our entry-level solution.

Dot

shocked Under One Hundred Thousand?

CEO

Yes Dot, under one hundred thousand for our basic Smart Source solution. You don’t have to buy everything to start, and even if you do, unless you also buy a considerable amount of services support for your organization, it’s still under the seven figure mark that you liked to charge.

Dot

still shocked How do you make money?

CEO

Economies of scale enabled by SaaS, and smart spending. We eat our own dog-food and follow our own advice. We keep our costs reasonable, which allows us to give our customers good service at a great price, and in return we keep them. We believe we have one of the highest customer retention rates in the sourcing space. But I’m sure you’re not here to discuss our success stories. What would you like to know?

Yakko

How you’re different.

CEO

Well, we think our product is better than our competition, but if you limit yourself to a “check-the-box” comparison, as so many analysts are prone to do, you’d see that our major solution differences when we are compared against your average sourcing vendor are our strategic sourcing decision optimization and supplier relationship management capabilities. These go well beyond your standard bid-negotiate-award-track capabilities found in your average e-RFX, e-Auction, and Contract Management applications and allow you to focus on identifying the best value for your money and then ensuring that the savings you negotiated, and contracted for, are realized.

Wakko

But don’t a number of companies claim to have Op-ti-my-za-shun?

CEO

Very few have true optimization, Wakko. Most just use heuristic decision support algorithms that they try to pass off as optimization. We use true Mixed Integer Linear Programming and best-of-breed industry solvers, like ILog CPlex, underneath a true strategic sourcing decision optimization model that meets ALL of the requirements outlined by the doctor in the wiki-paper.

Wakko

And that’s important because?

CEO

Because you need all four types of constraints — capacity, allocation, risk mitigation, and qualitiave — and costs — unit, usage, and freight — to accurately model your average real world sourcing scenario. Otherwise, the scenario you end up with is only approximate, which means the solution is only approximate, and, if you missed key constraints, not realistic. Without all of the constraints, and some “competitors” only provide a subset, you either get a result that’s too good to be true, and is, because you can’t implement it, or the result isn’t as good as you can get, because you couldn’t specify all of the constraints and discounts.

Wakko

And it works?

CEO

Remarkably. As covered in recent posts by the doctor on Sourcing Innovation and our own e-Sourcing Forum, we’ve had two events where we’ve saved over 20M on two projects of roughly 80 Million and 110 Million, respectively. We also find that we do hit the industry average of 12%+ above and beyond e-Auction savings alone when we apply the technology.

Yakko

It must be hard to use. You need a team of PhDs to drive it, right?

CEO

Not at all! It’s quite easy … your average intermediate buyer can drive it very successfully after just a few hours of training. You create the constraints using wizards and english sentence fragments. You can import the cost data from Excel or from your e-RFX. You can create a new what-if scenario by copying an existing scenario and changing only what you want. Your power-users will teach themselves to be experts in the tool in a matter of hours. I bet even you could use it Wakko.

Wakko

But I don’t know how to do Com-bin-a-tore-e-ul Op-ti-my-za-shun!

CEO

You don’t have to. Our tool does all the heavy lifting. If you can fill in a spreadsheet, use drop downs, and enter numbers in web-based text-boxes, you can use it. It’s really that easy.

Wakko

Wow!

Yakko

And what about SRM. Is that easy too?

CEO

As you would say, yassuredly.

Dot

So what’s it do?

CEO

It’s still in development, and we’re aiming for a late 2008 / early 2009 release, but what it’s going to do is streamline data capture and sourcing processes for the buyer and supplier alike. The first addition to our suite is a new supplier self-registration portal, backed up by a workflow-driven custom survey development tool. This pair of tools, the first for the supplier and the second for the buyer, is going to allow a buyer to define what information they need from every supplier, and then what information they need from suppliers in certain verticals and / or what information they need from suppliers who wish to supply certain types of products or services to the buyers. Then, when a supplier logs in and enters their basic information, as well as specifying the products or services they offer, they only have to fill out the surveys specific to them.

The survey construction tool, which will look similar to those who have tried our relatively new contract management tool, is based on the same underlying concept that the user should be able to define what fields, and meta-data fields, are of interest and allow the buyer to define what information they want, and how they want it. In addition, our survey construction tool, which builds on our RFX creation abilities, allows a user to define survey pages, and then makes uses of wizards to guide the buyer through survey construction. And, of course, all of this data is indexed, searchable, and easily managed. Furthermore, as with contract management, the buyer can define triggers on certain events (survey completion, changes to key data fields, etc.) and certain values (expiry dates, renewal dates, etc.) which will send off alerts or e-mails when certain events happen or certain actions need to be taken.

Dot

Well, that sounds pretty common sense. A few companies have that already. How’s it different?

CEO

What’s different is where we’re going with it and, most importantly, the approach we’re taking. We realize that the “R” in SRM stands for “relationship” and that is something that can not be accomplished with software-based tools alone. You can only have a relationship if there is interaction between the buyer and supplier on a regular basis. This means that there are only two ways a tool can help: enable communication or disable the roadblocks that prevent it. The most common roadblocks are the various tactical tasks that keep getting in the way, specifically, the tasks around collecting, organizing, tracking, and reporting on data.

Thus, in our view, a good SRM tool enables communication — and that’s why we’re building a new supplier portal, starting with our registration site — and centralizes all of the tactical data collection, organizing, tracking, and reporting in one location for the buyer — and that’s why we’re building a new supplier administration module, starting with surveys and scorecards, that is integrated with the rest of our suite, including contract management and meta-bid enabled optimization, which will allow the buyer to track agreements, expirations, certifications, insurance, and performance data in one place. Sometime next year, the tool will also allow senior buyers to define workflows around supplier contracts and interactions, which will guide the buying team through the organization’s best-practice supplier interaction processes. And we’re also building in new commodity-based classification hierarchies that will allow buyers to better segment their supply base and define hierarchical scorecards by commodity category and location to help them get a better view of total operational performance and how a supplier is impacting that.

Dot

And it’s all going to be integrated in one platform?

CEO

Seamlessly. Unlike our competitors, who have been on acquisition binges for the last decade, we built everything from the ground up on one platform, in one core language. That allows us to seamlessly integrate all of our products into one application in a way that most companies would envy. That’s why we think our SRM will succeed where many have failed before. It may not have all of the bells-and-whistles of some of the best-of-breed stand-alone products, but we believe it will have the core functionality that everyone needs, plus provide the advantage that you only have to deploy one platform. It’s the classic 80/20 rule — 80% of the functionality, for 20% of the cost, and effort, for our customers. When the full platform is released next year, we believe that the majority of customers will find that it does more than what they need. And that’s what we feel the market needs.

Yakko

That’s a very interesting take.

CEO

And a practical one. Most of the mid-market just needs basic functionality in sourcing and procurement to get through the day. There’s only a few Fortune 500 / Global 2000 companies that are advanced enough to productively use every bell and whistle you can imagine. We’d rather serve the 90% of the Fortune 500 / Global 2000, and, more importantly, the mid-market at large, who have been underserved for years due to the big-platform price tags that have traditionally put the traditional e-Sourcing platform solutions out of their reach.

Wakko

I think I get it. 20% of the Fortune 500 would give you 100 companies, and it’s hard to get 20% of the Fortune 500. But if you got 10% of the Global 10,000, that’s 1,000 companies, and there are still 9,000 other companies who need a solution, and a lot fewer companies serving them.

CEO

That’s right, Wakko. It’s about building a great company with a great tool that brings great value to, and enables, the mass market. That’s what we’re shooting for. And we think we’ll get there. And with that, I must get back to work. Have a good day.